Investor Resources

A working interest is a share of the right to drill and produce a well, and a share of the cost of doing it. If you own a 5% working interest in a well, you generally pay 5% of the cost to drill, complete and operate it, and you receive your share of the revenue from what it produces, after royalties and other burdens. The exact terms are set by the agreements that govern that well, usually including a joint operating agreement (JOA). Your election rights, billing arrangements, the consequences of not participating and your other obligations depend on those agreements.

The operator, here Hulen Operating Company, runs the day-to-day work on behalf of all the owners under those agreements.

A royalty interest is usually held by a mineral owner who leased their minerals. Royalty owners receive a share of production revenue but generally do not pay drilling or operating costs; the lease terms govern any deductions.

Working-interest owners pay their share of costs and receive what is left of their share of revenue after royalties and expenses. That means more of the cost and more of the risk, along with more of the potential revenue.

If you receive royalty payments from Hulen as a mineral owner, see our Landowners page.

Planning. The geology and engineering teams choose the location and design the well, and the operator obtains permits.

Drilling. A rig drills the well to its target. Crews run casing (steel pipe) and cement it in place, and the well is logged to evaluate the rock.

Completion. If the results support it, the well is completed: the casing is perforated at the target interval, which may be stimulated, and production equipment is installed.

Production. Oil, gas and water are produced, measured and sold. Production from most wells declines over time.

At each stage, results can change the plan, including a decision not to complete a well.

An Authorization for Expenditure (AFE) is the operator’s cost estimate for a specific job, such as drilling or completing a well. Under the applicable operating agreement, each working-interest owner typically receives the AFE and elects whether to participate. Depending on the agreement, owners may be asked to prepay their share or be billed as costs are incurred, and the agreement may set consequences for an owner who chooses not to participate. Actual costs can come in higher or lower than the estimate, and owners are generally responsible for their share of actual costs, not just the estimated amount.

Most working-interest owners receive two kinds of statements:

Revenue (owner) statement. It shows production sold from each well, the price received, deductions such as production taxes, and your share based on your net revenue interest, which is your working interest reduced by royalties and any other burdens, such as overriding royalties.

Joint interest billing (JIB). This is an invoice for your share of costs: drilling and completion costs billed against an AFE, and the monthly costs of operating the well. What is billed, and when, depends on the applicable operating agreement.

Working-interest investments carry real financial risk, and you can lose some or all of the money you put in. Risks include:

• Wells that are unsuccessful or dry, or that produce less than expected
• Costs that run over the AFE estimate
• Production that declines faster than expected
• Changes in oil and gas prices
• Equipment problems, weather and regulatory changes that delay or add cost to operations

Talk with your own financial, tax and legal advisers before you participate in any well.

Existing working-interest owners can email contact@hulenoil.com with the subject “Existing investor question”, or call our office at (405) 848-5252. Please include the well or property name and your owner number if you have one, but do not email account or bank details.

Mineral and royalty owners can reach our land team through the Landowners page.